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I didn't quite get it... 0.005% of what? Profit on sales in Ireland? Profit on sales in other parts of the world?

Oh, I get it, the sum of those two.

Are people complaining that when Apple sells a phone in Italy, Ireland taxes that at zero? Is that the complaint?

Apple considers that all sales across Europe actually happen in Ireland, so taxes on profit on sales in the whole EU are paid in Ireland. That part is perfectly legal within the EU.

The issue is that the normal tax rate in Ireland is around 12%, and Apple uses accounting tricks and tax exceptions to lower their effective tax rate there to 0.005%. That is the part that the the European Commission ruled illegal.

Effectively they argue that, in EU countries and India and Africa, the profit happens in Ireland. This is done through transfer pricing.

In Ireland, they argue that the profits happen at a "head office" which was not based in any country and did not have any employees or own premises.

(The ruling: http://ec.europa.eu/competition/state_aid/cases/253200/25320... linked from http://ec.europa.eu/competition/elojade/isef/case_details.cf...) - search for "AOI"

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